Legislative Reaction To Wolf’s Severance Tax Proposal

Sen. Gene Yaw (R-Lycoming), Majority Chair of the Senate Environmental Resources and Energy Committee, issued this statement on the new severance tax proposal—

“It’s absurd to think development will increase to the point of generating $1 billion by 2017 when companies are already slowing down development without a severance tax,” Yaw said.  “This same proposal was rejected under the Rendell Administration during much better economic times.  Does anyone in the Administration realize there is an oversupply of natural gas in the world market?

“Gov. Wolf opines that this (severance tax) is a ‘commonsense’ way to fund education.  What is the logic behind more taxes on an industry that is at its lowest point in several years?  Moreover, according to ‘Education Week’, Pennsylvania ranks very high, number eight, in funding and accomplishments in public education among all 50 states.  Commonsense?”

Sen. John Yudichak (D-Luzerne), Minority Chair of the Senate Environmental Resources and Energy Committee, released this statement on the severance tax proposal:

"I have introduced legislation and have fought for a fair and responsible 5 percent severance tax on natural gas production.  I am very encouraged with Gov. Wolf's announcement that he is proposing a severance tax plan that will invest in education, the environment and sustainable economic development for all of Pennsylvania.”

“Finally, the conversation around a comprehensive energy policy for Pennsylvania begins today with Gov. Wolf's severance tax proposal."
Senate Majority Leader Jake Corman (R-Centre) said, "If it's a billion dollars, that would be an amazing tax, so, look, we'll hold hearings on all his proposals, including this one, to see what they actually achieve, to see whether it helps or hurts the economy of Pennsylvania."

Sen. Jay Costa (D-Allegheny), Senate Minority Leader, issued the following statement: “The Governor has made a responsible and balanced proposal to tax the shale industry to help fund education.  The connection between the proposed severance tax and educational investments makes sense.  The new tax will provide resources that will help reverse the devastating impact of the $1 billion in education cuts made by the Corbett administration that have plagued the education community.

“Investing in education and meeting the needs of schools, students and taxpayers requires new resources.  Using the proceeds of a reasonable tax on shale drilling is a policy option that should be explored in detail by lawmakers.

“Pennsylvania’s current impact fee is insufficient and does not help schools and taxpayers.  Gov. Wolf’s proposed Pennsylvania Education Reinvestment Act is the correct, balanced approach that will generate additional revenues from the Marcellus industry.  This reasonable proposal will allow Pennsylvania gas to be competitive in the market and will not overburden the industry.”

House

House Majority Leader Dave Reed (R-Indiana) issued this statement regarding--  “While the governor’s 7.5 percent natural gas severance tax proposal should not surprise anyone, we all need to remember, there is no ‘free money.’

“By adding 4.7 cents for each 1,000 cubic feet on top of the 5 percent on the value of the gas, the governor is, in actuality, pushing roughly a 7.5 percent effective tax rate – one of the highest in the nation. In fact, of the top natural gas producing states, only Texas taxes at this rate, and comparatively, they don’t have a corporate tax like Pennsylvania.

“A comparison to West Virginia isn’t exactly fair either. Their corporate tax rate is just 6.5 percent, compared to our 9.9 percent rate. Its energy production and job growth has slowed compared to Pennsylvania – possibly due to the higher tax. Their unemployment rate stands at 6.3 percent, compared to our 4.8 percent.

“Taxing questions cannot be discussed in a vacuum. When the governor divulges the full details of his plan, we will evaluate his policy on the merits and will have, and the public deserves, a full and fair discussion of Pennsylvania’s tax structure compared with other states.

“Unfortunately, the cost of doing business in Pennsylvania is one of the highest in the nation, and we have been working to reduce those costs and encourage job creators come to Pennsylvania. Increasing those costs might not be the best message.

“The natural gas industry has helped drive the state’s unemployment to its lowest rate in nearly seven years and added billions to our economic activity.  

“The real question becomes what impact such a high tax rate would have on job creation throughout the state."

Rep. Kate Harper (R-Montgomery) issued the following statement in response to the severance tax proposal offered by Gov. Tom Wolf:

“Clearly, how to tax the natural gas industry and the Marcellus Shale is a debate we will need to have this year in the Capitol. I have my own proposal.

“My biggest concern with the governor’s plan is that it does not keep the existing impact fee intact, and that could mean a major hit to the budgets of communities directly impacted by drilling and to the many valuable statewide environmental programs supported by the fee. The impact fee has so far generated more than $630 million, and every community – even Montgomery County, which does not have a single gas well – is benefitting from these funds.

“I believe the governor is also overestimating how much money his proposed 5 percent tax will generate given recent drops in production.

“I have introduced a plan I believe will better meet the needs of the Commonwealth by leaving the impact fee and its distribution schedule in place, and then adding a 3.5 percent severance tax. My proposal would generate approximately $400 million annually, all of which would be dedicated to addressing the $32 billion unfunded liability in the Public School Employees’ Retirement System. Failure to address this problem will lead to skyrocketing property taxes across the Commonwealth in the very near future.

“That said, I am certainly looking forward to the debate and negotiation on this issue, which I believe is vital to our Commonwealth’s financial well-being. This growing industry provides us with an opportunity to help the already overburdened taxpayers of the Commonwealth, but it is important to do it right – we do not want to push the industry out of our state and the areas that need job growth the most.”

Rep. Harper’s severance tax proposal, House Bill 82, was referred to the House Environmental Resources and Energy Committee for consideration.

House Democratic Leader Frank Dermody (D-Allegheny) and Democratic Whip Mike Hanna (D-Centre) said they are encouraged by Gov. Tom Wolf’s Education Reinvestment Act, which proposes to increase the money available for Pennsylvania schools by levying a reasonable severance tax on natural gas production.

“This is going to be a key issue as we work on closing the large structural budget deficit,” Rep. Dermody said. “Gov. Wolf is following through on what he laid out in his campaign with a proposal to bring Pennsylvania into line with all the other states that already tax natural gas production.

“The resulting revenue will allow us to begin undoing the serious damage that was done to education during the last four years. No doubt there will be a lot of debate about this, but the governor’s plan provides a framework for the legislature to consider in the next few months.”

He noted that additional state funding of education will help relieve the upward pressure on school property taxes.

Rep. Hanna added: “The Wolf plan is something constructive we can build on. The governor and I agree we need to preserve the dollars that are going to all the municipalities and counties impacted by drilling.

“Enacting a severance tax comparable to other states also will increase public support for responsible gas drilling when the industry becomes an important partner in funding education. The added protection for natural gas leaseholders is another excellent component of the governor’s proposal,” Rep. Hanna said, “and it would fix a missing element of the impact fee law passed three years ago.”